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How To Overcome The 4 Toughest Challenges Faced By Subscription Box Companies

i2Subscription services have become wildly popular in the last few years – and for good reason. Customers love them because they can get access to a huge range of unique and hard to find products of all types. If you have an interest, there’s is a subscription box for you.

Another reason for the big-time growth in the space is it has become a lot easier to sell and market these types of services online.  There are tons of ecommerce tools and marketing applications out there for sellers to take advantage of to run their business more efficiently.

Here’s a recent post on ideas for marketing your subscription box website – click here.

If you have entered this expanding market yourself, you know that just because it is “easier” doesn’t make it a walk in the park. It’s a competitive landscape for online retailers of all types and subscription box companies are no different.

Here are 4 suggestions for taking on the tough challenges you face in this unique marketplace.

Maximizing profitability per customer
You’ve done the hard part of getting a new customer onboard, so how do you make the most of the customers whose trust you have earned? An important step is understanding the key metrics that can give you valuable insight into how you can make the most out of each hard won customer.

Tracking these metrics from month to month will help you identify important trends and the direction your business is heading.

Churn rate = number of customers who canceled divided by the total number of customers at the start of the month

Monthly recurring revenue = total billings from existing customers plus the first month’s payments from new customers

Customer acquisition cost = total new monthly sales less marketing expenses divided by the number of new customers added during the month

Customers are afraid of contracts
A lot of consumers are hesitant to make a commitment that involves having their credit cards charged automatically each month. Customers are afraid that if they don’t like the products they’ve signed up for, they’ll forget to cancel and waste money on stuff they don’t want.

This concern means first rate customer service is crucial. It’s something you need to deliver on or expect high volumes of people wanting refunds or being dissatisfied with the products.

One way to overcome the fear of contracts by allowing customers to sign up for a set number of months and pay upfront, so there are no unwanted credit card charges hanging over their head.

Maintaining value
Subscription services can be difficult because the need to constantly “wow” your current customers – not to mention the constant pressure of finding ways to attract new ones. Together, these can be overwhelming.

Change up the monthly products or offer new and current customers a special offer, like a free product for signing up or a free month of fees for customers that have been loyal for one year.

Competition popping up faster than ever
We mentioned this before but it’s an important point, as subscription box companies have gained popularity largely as a result of technology and the affordability to run them has improved. A downside to this is it means increased competition and the potential for over saturation.

This can be alleviated by developing a niche product or set of products, and pairing it with a compelling marketing strategy. Just like any retailer, projecting a good brand image though your online presence and website has to be your top priority.

Running a subscription service has its unique challenges and advantages. Smart business choices (like being efficient with how you pack and ship customer orders) and how you overcome these 4 common challenges will make the difference in the success or failure of your business.